How Kevin Ryan Comes Up With New Business Ideas

Allison Fass is deputy editor of Inc.com. A longtime business journalist at Forbes and The New York Times, she has also held roles in venture capital and innovation at Hearst Interactive Media and digital strategy at a start-up consultancy.

Since Kevin Ryan stepped down as chief executive of flash-sale site Gilt Groupe late last year (he's still chairman), he has been spending a big chunk of his time coming up with new business ideas he'd like to launch.

As a serial Internet entrepreneur--Ryan also founded Business Insider, which now has 26 million monthly uniques, and earlier built DoubleClick from a 20-person Internet start-up to 1,500 employees--he remains focused on online businesses, though he's agnostic to whether they're consumer-facing or business-facing. Among his particular areas of interest: health care and security.

How does Ryan come up with new ideas, and decide one is worth building into a business? At the Inc. Women's Summit in New York yesterday, Ryan explained he seeks to identify a very basic problem or "pain point" to fix.

Put simply, he said: "If anything online takes you more than two minutes, you should be thinking, 'Is there a better way to do this?' It shouldn't take two minutes."

A Track Record of Business Ideation

Indeed, the problem-to-fix method is how Ryan came up with the idea for Gilt, the flash-sale site he grew to more than seven million members and $600 million in revenue.

Several years ago, he was walking near his home on 18th street in Manhattan at 5PM on a weekday afternoon, when he spotted 200 women waiting in line. When he asked one what she was waiting for, she replied: "It's a sample sale!"

Ryan immediately recognized a worthwhile problem that could be solved. As it was, a lot of people were so deeply passionate about the sample sale, they would wait in line, despite the inconvenience. What if it were easier for them? "That was 200 people," Ryan thought, at the time. "Other people could be stuck at a conference, or live in Kansas or Westchester, so maybe there's 100,000 people who would like to be in this line but couldn't."

This problem-to-fix method is also how six years ago Ryan came up with the need for MongoDB, an open-source document database that now has 100,000 business customers and 200 employees, and a valuation higher than $1 billion (higher than Gilt's).

Ryan saw that a rudimentary document storage database was always the choke point for online businesses. Businesses today use the same database they used 25 years ago. "Any time I see something like that I think, 'Is that really the best we can do? Sometimes the answer is, 'No, there's a better way of doing it'."

You can easily see other examples of how this business idea generation process can work elsewhere, too, Ryan said. For instance, driving to the Hamptons, you could imagine avoiding a traffic jam if the people three cars ahead of you had just told you about it. That's the basis for Waze, which sold last month to Google for $1 billion. (Ryan had nothing to do with it.) "It's not that hard," Ryan said. "They solved a very simple problem."

Or an on-order car service. "I used an Uber car to come here," Ryan said. "That's yet another I didn't think of and it just raised money at a $3.5 billion valuation."

Your Turn: Think Big

Don't fall into the trap of creating such a specific idea that it can't replicate and scale. "Start as narrow as you can, and have an opportunity to lay the groundwork for something bigger," Ryan said.

A social network for left-handed Albanians, say, is not going to be big enough that it matters, Ryan joked. When he launched Gilt, he was determined to pick a name and design that was gender-neutral, so he could easily roll it out to men's shopping when the time came. Rue La La, another members online shopping site on the other hand Ryan pointed out, started with a feminine name and color scheme, making it harder to segue into other segments.

Ryan had a similar roll-out approach for Business Insider. He started very focused on two journalists covering technology in New York, and was able to then expand to technology nationwide, and then to business, finance, and Wall Street.

Value Your Time: Cut Bait After a Year or Two

If you're pursuing an idea and it doesn't work within the first year or two, "you have to just suck it up and say, 'This idea didn't work,'" Ryan said. "Either make a radical shift, or shut it down, or sell it and get out."

This was the case for Ryan with ShopWiki, a shopping search engine he started in 2005. "It wasn't viral. It wasn't growing. Advertising wouldn't have helped." So he got out.

You don't want to get stuck on a dead-end project for four years. "Your time is very valuable," Ryan added.